We are several months into the new US Administration led by President Donald Trump and it has been anything but business as usual. Each day brings tweets, suggestions of scandal, press conferences that leave reporters trying to make sense of answers and just general confusion all round.
Nobody would blame investors who may be feeling it would be best to just hibernate for four years and hope something akin to normal might surface once again. But the reality is we can’t run and hide from market uncertainty and confusion. We still need to put our money to work. Despite the noise, some themes are emerging from Trump’s White House that suggest some investment paths worth considering.
Turning Back The Clock
President Trump appears committed to removing a lot of the checks and balances on the financial services industry that were implemented after the 2008 financial crisis – specifically elements of Dodd Frank that have imposed high compliance costs on US banks, both national and regional. The Republican rationale is, that in addition higher operating costs and reduced profitability, Dodd Frank has also reduce market liquidity, and with that slowed economic growth.
Trump and Republicans in Congress have made clear they want to roll back much of Dodd Frank, and are promoting the Financial Choice Act as a potential alternative that would be less burdensome. Such a change could make US financial companies more appealing to own.
Trump’s decision to pull out of the Trans Pacific Partnership and to renegotiate NAFTA point to a more protectionist US economy. Instituting tariffs and border taxes will make goods and services more expensive for Americans. From a consumer perspective, people will want to look for cheaper goods and staples so discount retailers could benefit. With an inward looking economy, investment opportunities outside the US could be worth considering.
The Guns and Butter President
Trump’s recently released budget proposes reduced spending across the board, except in defense and infrastructure. In fact, Trump is going pretty much all-in on both of those areas. With sabre rattling in South East Asia, aerospace and defense companies could stand to benefit. Trump also campaigned heavily on the promise to inject $1-trillion in stimulus to rebuild America’s infrastructure (border walls not withstanding). This could be lucrative to commodities, and construction oriented companies.
Back to Basics
Despite the amount of uncertainty that is being created and potential inflationary impacts, there are things we still will need on a daily basis. Food is high on the list. Even if food costs rise, demand will remain relatively robust. Food processors and distributors could more than hold their own.
With a Republican dominated Congress that could easily rubber stamp his initiatives, and barring any Watergate-like revelations, there’s a pretty good chance that President Trump will get what he wants and most of these policies could be implemented. Whether these are good or bad is another discussion. As investors, we need to play with the cards that we are dealt with and make our investment decisions accordingly even if that means we may have to cover our ears and sing an Aria of Covfefe.
Aman Raina is an Investment Coach and Founder of Sage Investors. Aman helps new and experienced investors who want to be financially secure but feel confused and intimidated by the investing world. They either don’t know where to start or feel they aren’t making progress with their portfolios. Aman teaches and engages them on how to make educated investment decisions so that they can achieve financial freedom with confidence.